Credit Connect

The TUC has published a new analysis of household debt, which finds that unsecured debt per household will reach a record high of £13,900 this year. Unsecured debt per household was £13,200 in 2016 – the highest figure since the financial crisis, and only marginally below the peak of £13,300 in 2007.

The TUC analysis also finds that unsecured debt per household is set to exceed £15,000 before the end of the next parliament (all figures are in 2016 prices). The rise in household debt reflects the UK’s ongoing living standards crisis, says the TUC. Wages in the UK are still worth around £20 per week less than before the financial crisis a decade ago. And official figures from the ONS show that real wages are now falling again.

The TUC believes the growth in household debt should concern all the political parties. The next government will inherit an economy that is heavily reliant on household spending to maintain growth, but in which debt per household is higher than before the financial crisis.

County Court debt judgments against consumers have risen 35% in England and Wales, and the Bank of England is investigating concerns about unsecured lending to households.

TUC General Secretary Frances O’Grady said: “The surge in household debt is putting the economy in the danger zone. We’ve got this problem because wages haven’t recovered. Credit cards and payday loans are helping to prop up household spending for now, but millions of families are running on empty.

“The next government must act urgently to deliver the higher wages Britain needs for sustainable growth. They must boost the minimum wage, and end pay restrictions for public servants like nurses, firefighters and midwives. A lot more government support is needed for the parts of Britain where well-paid jobs are in short supply. Communities that lack good jobs today could thrive tomorrow if they get proper investment in training, transport links, broadband and decent housing.”

Mike O’Connor, Chief Executive of StepChange Debt Charity, said “What the TUC describes is consistent with what we are seeing. We are also seeing levels of unsecured debt rising for the first time since 2008 and the prospects are worrying. Based on April 2017 data, we estimate 8.8 million people turned to credit to pay for everyday household expenses over the past year. More than half of these were in employment, 41% in full time work. Stagnant wages and rising inflation are making more people vulnerable to problem debt.

“We welcome Labour and Conservative manifesto commitments to introduce a ‘Breathing Space’ scheme to help people manage serious debt problems. In addition to better protections for people in debt, the next government should commit to action to help the 2.9m people already struggling with severe problems and help over 9m who are showing signs of financial distress. It should also work to ensure better alternatives to dangerous forms of high-cost credit. And it should act to help families build up savings to insulate them from problem debt.”